Study Finds Outsourcing is on the Rise -- Even in India

Washington (March 30, 2004) -- The outsourcing of services offshore has become a global trend affecting not only the United States, but also the European Union, Japan and even India. This is one of the business patterns highlighted in a white paper issued by the American Electronics Association titled "Offshore Outsourcing in an Increasingly Competitive and Rapidly Changing World."

Amid concerns in the U.S. that an increasing number of back-office accounting services such as write-up and tax preparation are being offshored to India, the AeA notes that outsourcing services abroad is "a worldwide phenomenon that is especially affecting the developed countries of the world." The study cites Deloitte Research estimates that Western Europe will offshore 730,000 financial services/IT jobs by 2008, and Japan will offshore 400,000. Meanwhile, in India, Tata Consultancy Services, one of the country's largest software exporters, has begun to offshore to China.

The AEA study contends, "As with free trade, offshoring is in the long-term competitive interest of the United States." The paper cites McKinsey & Co. estimates that every dollar spent on outsourcing creates $1.45 to $1.47 in the global economy, with $1.12 to $1.14 returning to the U.S. economy.

The study further concludes, "In an intense, international, competitive environment, many companies have no choice but to offshore outsource certain jobs if they are to remain world-class competitive. Failure to do so in certain instances not only will result in less competitiveness, but in the elimination of many more jobs than would be lost to offshore outsourcing."

Within the last couple of years, several U.S. tax prep vendors have entered strategic alliances with business process outsourcing providers that have operations in India. For instance, RIA has partnerships with three firms -- G.K. Management Services, Outsource Partners International and SurePrep, while Creative Solutions has partnerships with both SurePrep and Xpitax; and CCH partners with both Datamatics and Mphasis Group. Last month, accounting industry luminaries K.C. Truby and Wayne Harding founded Casper, Wyo.-based Accountants In India, a global employment start-up that matches U.S. CPA firms with trained tax and accounting professionals in India. RIA and Creative Solutions are Thomson businesses.

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